Superannuation funds regained positive territory over April, returning 2.2 per cent after falling 0.7 per cent in March on share market volatility, according to new figures from SuperRatings.
That puts the average balanced fund 8.1 per cent ahead of where it was on April 30 2017.
Over five years, balanced accumulation funds have returned 8.5 per cent while funds in pension mode have returned 9.3 per cent.
Over 10 years, the figures are 6 per cent and 6.6 per cent respectively.
Those returns mean a balanced fund worth $100,000 in April 2008 would have been worth $173,506 at the end of April.
They also question the value of choosing high growth options because over the same period the average growth fund grew to $174,158 – small payment for the extra risk of choosing that more volatile option.
However that is not deterring those looking for better performance with younger members particularly taking “options that offer more growth for more risk,” SuperRatings chief executive Kirby Rappell said.
New figures also show that pooled super funds have continued to outperform self-managed super funds, with research house Rainmaker putting the average SMSF return for the April year at 5.4 per cent. For 10 years SMSFs have returned 5.3 per cent annually.
Super returns were negative in March and April as a result of gyrating share markets.
“Members are undoubtedly pleased to see the back of the sort of volatility we experienced in February,” Mr Rappell said.
“But volatility is still high compared to the historic lows of last year, and for the rest of 2018 it is hard to see this … volatility disappearing off the radar,” he said.
The volatility will be driven by markets responding to central banks raising interest rates.
Industry super funds have dominated performance tables in both the growth and balanced options with not-for-profit funds taking all top 10 positions in both categories.
”REST and CareSuper remain the best performing balanced options over the last decade for those in the accumulation phase, with returns of 7.1 per cent per annum. Among growth options, CareSuper has outperformed the pack with a return of 7.5 per cent per annum over 10 years, followed closely by Energy Super and Catholic Super on 7.4 per cent,” Mr Rappell said.
Rainmaker compares the performance of the average SMSF owner’s investment choices with how they would have performed had they chosen the same asset allocations that pooled funds used for their default MySuper option for workers who don’t select their own funds. It found they seriously underperformed.
The average SMSF returned 5.4 per cent for the April year and 5.3 per cent over 10 years.That compares to 7.4 per cent over a year and 5.7 per cent over 10 years had they chosen the typical MySuper asset allocation.
The difference appears to relate to the sophistication of individual investors versus big funds with research capability and international connections. As the chart shows, the punters with SMSFs have a big appetite for local shares, with their franked dividends, property, and cash.
The cash predilection may be a response to the pain felt by equities during the global financial crisis. The problem with that is cash has delivered very low returns in recent years.
The high property showing is likely a result of SMSF owners buying investment properties, a phenomenon that has seen their debt grow dramatically.
Pooled funds, by contrast have far bigger allocations to international shares, bonds and alternative investments like private equity and infrastructure. That diversity has pushed their performance above traditional SMSFs.
Fund choice can make a massive difference to returns, SuperRatings demonstrates. The top performing fund would have turned $100,000 into $194,341 over the decade compared to $139,831 for the worst balanced performer.
The New Daily is owned by industry super funds